Small brokers struggle to compete with big players
Small brokers struggle to compete with big players
Brokerage companies are facing intense competition to win customers as they struggle to offer the type of low interest loans that are available at larger, more established brokers.
In this race, small brokers are always at a disadvantage. The prolonged downturn on the stock market hit many investors. Therefore, more and more investors are paying attention to trading costs such as brokerage fees and interest rates on borrowing.
Current margin interest rates at securities companies have fallen substantially compared to five months ago.
Viet Capital Securities offers the lowest margin interest rate at 14.76 per cent per year (0.041 per cent a day), lower than the previous rate of 17.28 per cent.
The rate at Bao Viet Securities is 15 per cent per year (0.042 per cent a day), while it is 15.5 per cent per year (0.043 per cent a day) at Maybank KimEng Securities. The margin interest rate at both HCM City Securities and Vietcombank Securities is higher at 16.2 per cent per year (0.045 per cent a day).
However, investors must borrow at higher interest rates of over 17 per cent per year at medium-d and small brokers.
To stimulate trading, some companies are even provide interest-fee margin loans for the short term.
VNDirect Securities Co announced a zero per cent interest in the rate for six-day margin loans, effective from August 15, while its normal margin interest rate is 0.048 per cent a day.
Other companies such as FPT Securities and APEC Securities also offer interest free two-day margin loans. Their average margin interest rates are 0.045 per cent a day and 0.048 per cent per day, respectively.
However, a similar move is unlikely to be made by small brokers.
According to market insiders, at small securities companies where profits are a few hundreds of million dong, fees on margin loans are an important revenue source. Besides, small companies are not able to reduce margin interest rates below 15 per cent per year because they also have to borrow at 13-14 per cent.
Small firms also find it harder to attract customers via professional analysis reports. Big companies who can invest a few billion dong a year to build their analysis team can send investors daily reports, updating them on hot stocks and new economic trends. This is a tall order for small businesses.
Small brokers can not compete with big players due to a shortage of capital and human resources. Many of these brokers, such as Au Viet, Sao Viet, Cho Lon, Delta, Ha Noi and Truong Son, have had to shut down.
There are over 100 securities companies now operating in the market but experts say the number should be reduced to 30.
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